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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
(Mark One)
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☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the quarterly period ended
March 31,
2023
OR
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the transition period from ____________ to
___________
Commission File Number
1-12031
UNIVERSAL DISPLAY CORPORATION
(Exact name of registrant as specified in its charter)
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Pennsylvania
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23-2372688
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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250 Phillips Boulevard,
Ewing,
New Jersey
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08618
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code:
(609)
671-0980
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock, $0.01 par value
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OLED
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The Nasdaq Stock Market LLC
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes
☒
No
☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files).
Yes
☒
No
☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
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Large accelerated filer
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☒
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Accelerated filer
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☐
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Emerging growth company
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial account standards
provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes
☐
No
☒
As of May 2, 2023, the registrant had outstanding
47,334,131
shares of common stock.
TABLE OF CONTENTS
PART I – FINANCIAL
INFORMATION
ITEM 1. FINANCIAL
STATEMENTS
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(UNAUDITED)
(in thousands, except share and per share data)
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March 31, 2023
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December 31, 2022
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ASSETS
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CURRENT ASSETS:
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Cash and cash equivalents
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$
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158,294
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$
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93,430
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Short-term investments
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487,812
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484,345
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Accounts receivable
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92,677
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92,664
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Inventory
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174,245
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183,220
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Other current assets
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37,193
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45,791
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Total current assets
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950,221
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899,450
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PROPERTY AND EQUIPMENT, net of accumulated depreciation of
$123,388 and
$117,118
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145,281
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143,445
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ACQUIRED TECHNOLOGY, net of accumulated amortization of
$174,820 and
$189,671
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35,843
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38,382
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OTHER INTANGIBLE ASSETS, net of accumulated amortization of
$9,341 and
$8,989
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7,947
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8,247
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GOODWILL
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15,535
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15,535
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INVESTMENTS
|
|
|
213,369
|
|
|
|
259,861
|
|
|
DEFERRED INCOME TAXES
|
|
|
63,292
|
|
|
|
58,161
|
|
|
OTHER ASSETS
|
|
|
104,224
|
|
|
|
109,739
|
|
|
TOTAL ASSETS
|
|
$
|
1,535,712
|
|
|
$
|
1,532,820
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
9,741
|
|
|
$
|
9,519
|
|
|
Accrued expenses
|
|
|
25,346
|
|
|
|
51,002
|
|
|
Deferred revenue
|
|
|
37,419
|
|
|
|
45,599
|
|
|
Other current liabilities
|
|
|
42,451
|
|
|
|
29,577
|
|
|
Total current liabilities
|
|
|
114,957
|
|
|
|
135,697
|
|
|
DEFERRED REVENUE
|
|
|
17,843
|
|
|
|
18,279
|
|
|
RETIREMENT PLAN BENEFIT LIABILITY
|
|
|
60,248
|
|
|
|
59,790
|
|
|
OTHER LIABILITIES
|
|
|
43,199
|
|
|
|
43,685
|
|
|
Total liabilities
|
|
|
236,247
|
|
|
|
257,451
|
|
|
COMMITMENTS AND CONTINGENCIES (Note
18)
|
|
|
|
|
|
|
|
SHAREHOLDERS’ EQUITY:
|
|
|
|
|
|
|
|
Preferred Stock, par value $0.01 per
share,
5,000,000 shares
authorized,
200,000
shares of Series A Nonconvertible Preferred Stock
issued and outstanding
(liquidation value of $7.50 per
share or $1,500)
|
|
|
2
|
|
|
|
2
|
|
|
Common Stock, par value $0.01 per
share,
200,000,000 shares
authorized,
48,697,467
and
49,136,030 shares
issued, and
47,331,819 and
47,770,382 shares
outstanding, at
March 31, 2023 and December 31, 2022,
respectively
|
|
|
487
|
|
|
|
491
|
|
|
Additional paid-in capital
|
|
|
679,390
|
|
|
|
681,335
|
|
|
Retained earnings
|
|
|
676,347
|
|
|
|
653,277
|
|
|
Accumulated other comprehensive loss
|
|
|
(15,477
|
)
|
|
|
(18,452
|
)
|
|
Treasury stock, at cost (1,365,648 shares
at March 31, 2023 and December 31, 2022)
|
|
|
(41,284
|
)
|
|
|
(41,284
|
)
|
|
Total shareholders’ equity
|
|
|
1,299,465
|
|
|
|
1,275,369
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
$
|
1,535,712
|
|
|
$
|
1,532,820
|
|
The accompanying notes are an integral part of these Consolidated
Financial Statements.
1
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF INCOME
(UNAUDITED)
(in thousands, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
2023
|
|
|
2022
|
|
|
REVENUE:
|
|
|
|
|
|
|
|
Material sales
|
|
$
|
70,190
|
|
|
$
|
86,691
|
|
|
Royalty and license fees
|
|
|
55,210
|
|
|
|
59,802
|
|
|
Contract research services
|
|
|
5,067
|
|
|
|
3,977
|
|
|
Total revenue
|
|
|
130,467
|
|
|
|
150,470
|
|
|
COST OF SALES
|
|
|
32,970
|
|
|
|
33,163
|
|
|
Gross margin
|
|
|
97,497
|
|
|
|
117,307
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
Research and development
|
|
|
31,423
|
|
|
|
26,545
|
|
|
Selling, general and administrative
|
|
|
15,396
|
|
|
|
21,062
|
|
|
Amortization of acquired technology and other intangible
assets
|
|
|
2,891
|
|
|
|
5,498
|
|
|
Patent costs
|
|
|
2,255
|
|
|
|
1,798
|
|
|
Royalty and license expense
|
|
|
164
|
|
|
|
154
|
|
|
Total operating expenses
|
|
|
52,129
|
|
|
|
55,057
|
|
|
OPERATING INCOME
|
|
|
45,368
|
|
|
|
62,250
|
|
|
Interest income, net
|
|
|
6,967
|
|
|
|
291
|
|
|
Other loss, net
|
|
|
(703
|
)
|
|
|
(34
|
)
|
|
Interest and other loss, net
|
|
|
6,264
|
|
|
|
257
|
|
|
INCOME BEFORE INCOME TAXES
|
|
|
51,632
|
|
|
|
62,507
|
|
|
INCOME TAX EXPENSE
|
|
|
(11,793
|
)
|
|
|
(12,537
|
)
|
|
NET INCOME
|
|
$
|
39,839
|
|
|
$
|
49,970
|
|
|
NET INCOME PER COMMON SHARE:
|
|
|
|
|
|
|
|
BASIC
|
|
$
|
0.83
|
|
|
$
|
1.05
|
|
|
DILUTED
|
|
$
|
0.83
|
|
|
$
|
1.05
|
|
|
WEIGHTED AVERAGE SHARES USED IN COMPUTING NET
INCOME PER COMMON SHARE:
|
|
|
|
|
|
|
|
BASIC
|
|
|
47,523,593
|
|
|
|
47,369,764
|
|
|
DILUTED
|
|
|
47,567,007
|
|
|
|
47,440,281
|
|
|
CASH DIVIDENDS DECLARED PER COMMON SHARE
|
|
$
|
0.35
|
|
|
$
|
0.30
|
|
The accompanying notes are an integral part of these Consolidated
Financial Statements.
2
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME
(UNAUDITED)
(in thousands)
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2023
|
|
|
2022
|
|
|
NET INCOME
|
$
|
39,839
|
|
|
$
|
49,970
|
|
|
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
|
|
|
|
|
|
|
Unrealized gain (loss) on available-for-sale securities,
net of tax of ($733)
and $1,097,
respectively
|
|
2,627
|
|
|
|
(3,935
|
)
|
|
Amortization of prior service cost and actuarial loss for
retirement plan included in net periodic pension
costs,
net of tax of ($71)
and ($143),
respectively
|
|
253
|
|
|
|
509
|
|
|
Change in cumulative foreign currency translation
adjustment
|
|
95
|
|
|
|
(234
|
)
|
|
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)
|
|
2,975
|
|
|
|
(3,660
|
)
|
|
COMPREHENSIVE INCOME
|
$
|
42,814
|
|
|
$
|
46,310
|
|
The accompanying notes are an integral part of these Consolidated
Financial Statements.
3
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
(in thousands, except for share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2023
|
|
|
|
|
Series A
Nonconvertible
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Accumulated
Other
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Treasury Stock
|
|
|
Shareholders’
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Loss
|
|
|
Shares
|
|
|
Amount
|
|
|
Equity
|
|
|
BALANCE,
DECEMBER 31, 2022
|
|
|
200,000
|
|
|
$
|
2
|
|
|
|
49,136,030
|
|
|
$
|
491
|
|
|
$
|
681,335
|
|
|
$
|
653,277
|
|
|
$
|
(18,452
|
)
|
|
|
1,365,648
|
|
|
$
|
(41,284
|
)
|
|
$
|
1,275,369
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
39,839
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
39,839
|
|
|
Other comprehensive income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,975
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,975
|
|
|
Cash dividend
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(16,769
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(16,769
|
)
|
|
Issuance of common stock
to employees
|
|
|
—
|
|
|
|
—
|
|
|
|
126,846
|
|
|
|
1
|
|
|
|
3,853
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,854
|
|
|
Shares withheld for employee taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
(51,703
|
)
|
|
|
—
|
|
|
|
(7,181
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(7,181
|
)
|
|
Cancellation of restricted stock awards
|
|
|
—
|
|
|
|
—
|
|
|
|
(526,241
|
)
|
|
|
(5
|
)
|
|
|
5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Issuance of common stock to Board of Directors
and Scientific Advisory Board
|
|
|
—
|
|
|
|
—
|
|
|
|
6,896
|
|
|
|
—
|
|
|
|
723
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
723
|
|
|
Issuance of common stock to employees under an ESPP
|
|
|
—
|
|
|
|
—
|
|
|
|
5,639
|
|
|
|
—
|
|
|
|
655
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
655
|
|
|
BALANCE,
MARCH 31, 2023
|
|
|
200,000
|
|
|
$
|
2
|
|
|
|
48,697,467
|
|
|
$
|
487
|
|
|
$
|
679,390
|
|
|
$
|
676,347
|
|
|
$
|
(15,477
|
)
|
|
|
1,365,648
|
|
|
$
|
(41,284
|
)
|
|
$
|
1,299,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2022
|
|
|
|
|
Series A
Nonconvertible
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Accumulated
Other
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Treasury Stock
|
|
|
Shareholders’
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Loss
|
|
|
Shares
|
|
|
Amount
|
|
|
Equity
|
|
|
BALANCE,
DECEMBER 31, 2021
|
|
|
200,000
|
|
|
$
|
2
|
|
|
|
49,065,924
|
|
|
$
|
491
|
|
|
$
|
658,728
|
|
|
$
|
500,212
|
|
|
$
|
(18,235
|
)
|
|
|
1,365,648
|
|
|
$
|
(41,284
|
)
|
|
$
|
1,099,914
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
49,970
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
49,970
|
|
|
Other comprehensive loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,660
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,660
|
)
|
|
Cash dividend
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(14,246
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(14,246
|
)
|
|
Issuance of common stock
to employees
|
|
|
—
|
|
|
|
—
|
|
|
|
47,748
|
|
|
|
—
|
|
|
|
5,979
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,979
|
|
|
Shares withheld for employee taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
(22,347
|
)
|
|
|
—
|
|
|
|
(7,896
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(7,896
|
)
|
|
Issuance of common stock to Board of Directors
and Scientific Advisory Board
|
|
|
—
|
|
|
|
—
|
|
|
|
5,630
|
|
|
|
—
|
|
|
|
730
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
730
|
|
|
Issuance of common stock to employees under an ESPP
|
|
|
—
|
|
|
|
—
|
|
|
|
2,875
|
|
|
|
—
|
|
|
|
509
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
509
|
|
|
BALANCE,
MARCH 31, 2022
|
|
|
200,000
|
|
|
$
|
2
|
|
|
|
49,099,830
|
|
|
$
|
491
|
|
|
$
|
658,050
|
|
|
$
|
535,936
|
|
|
$
|
(21,895
|
)
|
|
|
1,365,648
|
|
|
$
|
(41,284
|
)
|
|
$
|
1,131,300
|
|
The accompanying notes are an integral part of these Consolidated
Financial Statements.
4
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF CASH FLOWS
(UNAUDITED)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
2023
|
|
|
2022
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net income
|
|
$
|
39,839
|
|
|
$
|
49,970
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
Depreciation
|
|
|
6,496
|
|
|
|
5,627
|
|
|
Amortization of intangibles
|
|
|
2,891
|
|
|
|
5,498
|
|
|
Amortization of premium and discount on investments, net
|
|
|
(3,597
|
)
|
|
|
(271
|
)
|
|
Stock-based compensation to employees
|
|
|
3,992
|
|
|
|
6,085
|
|
|
Stock-based compensation to Board of Directors and Scientific
Advisory Board
|
|
|
423
|
|
|
|
430
|
|
|
Deferred income tax benefit
|
|
|
(5,936
|
)
|
|
|
(1,380
|
)
|
|
Retirement plan expense, net of benefit payments
|
|
|
782
|
|
|
|
1,359
|
|
|
Decrease (increase) in assets:
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(13
|
)
|
|
|
2,692
|
|
|
Inventory
|
|
|
8,975
|
|
|
|
(9,080
|
)
|
|
Other current assets
|
|
|
8,598
|
|
|
|
(8,172
|
)
|
|
Other assets
|
|
|
5,515
|
|
|
|
9,488
|
|
|
Increase (decrease) in liabilities:
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
(24,116
|
)
|
|
|
(4,261
|
)
|
|
Other current liabilities
|
|
|
12,874
|
|
|
|
5,807
|
|
|
Deferred revenue
|
|
|
(8,616
|
)
|
|
|
(13,568
|
)
|
|
Other liabilities
|
|
|
(486
|
)
|
|
|
2,384
|
|
|
Net cash provided by operating activities
|
|
|
47,621
|
|
|
|
52,608
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(9,098
|
)
|
|
|
(10,751
|
)
|
|
Purchases of intangibles
|
|
|
(51
|
)
|
|
|
(12
|
)
|
|
Purchases of investments
|
|
|
(65,207
|
)
|
|
|
(24,915
|
)
|
|
Proceeds from sale and maturity of investments
|
|
|
115,031
|
|
|
|
50,240
|
|
|
Net cash provided by investing activities
|
|
|
40,675
|
|
|
|
14,562
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
518
|
|
|
|
403
|
|
|
Payment of withholding taxes related to stock-based compensation to
employees
|
|
|
(7,181
|
)
|
|
|
(7,896
|
)
|
|
Cash dividends paid
|
|
|
(16,769
|
)
|
|
|
(14,246
|
)
|
|
Net cash used in financing activities
|
|
|
(23,432
|
)
|
|
|
(21,739
|
)
|
|
INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
64,864
|
|
|
|
45,431
|
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
93,430
|
|
|
|
311,993
|
|
|
CASH AND CASH EQUIVALENTS, END OF PERIOD
|
|
$
|
158,294
|
|
|
$
|
357,424
|
|
|
The following non-cash activities occurred:
|
|
|
|
|
|
|
|
Unrealized gain (loss) on available-for-sale securities
|
|
$
|
3,202
|
|
|
$
|
(5,031
|
)
|
|
Common stock issued to Board of Directors and Scientific Advisory
Board that was
earned and accrued for in a previous
period
|
|
|
300
|
|
|
|
300
|
|
|
Net change in accounts payable and accrued expenses related to
purchases of property
and equipment
|
|
|
766
|
|
|
|
2,077
|
|
The accompanying notes are an integral part of these Consolidated
Financial Statements.
5
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
1. BUSINESS:
Universal Display Corporation and its subsidiaries (the Company) is
a leader in the research, development and commercialization of
organic light emitting diode (OLED) technologies and materials for
use in display and solid-state lighting applications. OLEDs are
thin, lightweight and power-efficient solid-state devices that emit
light and can be manufactured on both flexible and rigid
substrates, making them highly suitable for use in full-color
displays and as lighting products. OLED displays are capturing a
growing share of the display market, especially in the mobile
phone, television, monitor, wearable, tablet, notebook and personal
computer, augmented reality (AR), virtual reality (VR) and
automotive markets. The Company believes this is because OLEDs
offer potential advantages over competing display technologies with
respect to power efficiency, contrast ratio, viewing angle, video
response time, form factor and manufacturing cost. The Company also
believes that OLED lighting products have the potential to replace
many existing light sources in the future because of their
high-power efficiency, excellent color rendering index, low
operating temperature and novel form factor. The Company’s
technology leadership, intellectual property position, and more
than 20 years of experience working closely with leading OLED
display manufacturers are some of the competitive advantages that
should enable the Company to continue to share in the revenues from
OLED displays and lighting products as they gain wider
acceptance.
The Company’s primary business strategy is to (1) develop new OLED
materials and sell existing and new materials to product
manufacturers of products for display applications, such as mobile
phones, televisions, monitors, wearables, tablets, portable media
devices, notebook computers, personal computers and automotive
applications, and specialty and general lighting products; and (2)
further develop and either license or otherwise commercialize the
Company’s proprietary OLED material, device design and
manufacturing technologies to those manufacturers. The Company has
established a significant portfolio of proprietary OLED
technologies and materials, primarily through internal research and
development efforts and acquisitions of patents and patent
applications, as well as maintaining long-standing, and
establishing new relationships with world-class universities,
research institutions and strategic manufacturing partnerships. The
Company currently owns, exclusively licenses or has the sole right
to sublicense more than
5,500
patents issued and pending worldwide.
The Company manufactures and sells its proprietary OLED materials
to customers for evaluation and use in commercial OLED products.
The Company also enters into agreements with manufacturers of OLED
display and lighting products under which it grants them licenses
to practice under the Company’s patents and to use the Company's
proprietary know-how. At the same time, the Company works with
these and other companies that are evaluating the Company's OLED
material, device design and manufacturing technologies for possible
use in commercial OLED display and lighting products.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Interim Financial Information
In the opinion of management, the accompanying unaudited
Consolidated Financial Statements have been prepared in accordance
with the requirements of the Securities and Exchange Commission for
interim financial reporting and contain all adjustments (consisting
of only normal recurring adjustments) necessary to present fairly
the Company’s financial position as of March 31, 2023 and results
of operations for the three months ended March 31, 2023 and 2022,
and cash flows for the three months ended March 31, 2023 and 2022.
While management believes that the disclosures presented are
adequate to make the information not misleading, these unaudited
Consolidated Financial Statements should be read in conjunction
with the audited Consolidated Financial Statements and the notes
thereto in the Company’s latest year-end Consolidated Financial
Statements, which are included in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2022.
The results of the Company’s operations for any interim period are
not necessarily indicative of the results of operations for any
other interim period or for the full year.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of
Universal Display Corporation and its wholly owned subsidiaries,
UDC, Inc., UDC Ireland Limited (UDC Ireland), Universal Display
Corporation Hong Kong, Limited, Universal Display Corporation
Korea, Y.H. (UDC Korea), Universal Display Corporation Japan GK,
Universal Display Corporation China, Ltd., Adesis, Inc. (Adesis),
UDC Ventures LLC, OVJP Corporation (OVJP Corp) and OLED Material
Manufacturing Limited (OMM). All intercompany transactions and
accounts have been eliminated.
6
Reclassification of Prior Year Presentation
Certain prior year adjustments to reconcile net income to net cash
provided by operating activities have been reclassified on the
Consolidated Statements of Cash Flows to conform to the current
year presentation. These adjustments have been consolidated into
their respective operating assets and liabilities accounts,
specifically, inventory, other current assets, other assets and
deferred revenue.
Management’s Use of Estimates
The preparation of financial statements in conformity with U.S.
generally accepted accounting principles (GAAP) requires management
to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. The estimates made are principally in the areas of revenue
recognition including estimates of material unit sales and
royalties, the useful life of acquired intangibles, lease
liabilities, right-of-use assets, the use and recoverability of
inventories, intangibles, investments and income taxes including
realization of deferred tax assets, stock-based compensation and
retirement benefit plan liabilities. Actual results could differ
from those estimates.
Inventories
Inventories consist of raw materials, work-in-process and finished
goods, and are stated at the lower of cost, determined on a
first-in, first-out basis, or net realizable value. Inventory
valuation and firm committed purchase order assessments are
performed on a quarterly basis and those items that are identified
to be obsolete or in excess of forecasted usage are written down to
their estimated realizable value. Estimates of realizable value are
based upon management’s analyses and assumptions, including, but
not limited to, forecasted sales levels by product, expected
product lifecycle, product development plans and future demand
requirements. A 12-month rolling forecast based on factors,
including, but not limited to, production cycles, anticipated
product orders, marketing forecasts, backlog, and shipment
activities is used in the inventory analysis. If market conditions
are less favorable than forecasts or actual demand from customers
is lower than estimates, additional inventory write-downs may be
required. If demand is higher than expected, inventories